Making Tax Digital - what you need to know
The UK government is moving HMRC to a fully digital based tax system. This means businesses must keep digital records of their transactions, and submit these digitally to HMRC.
HMRC believes the current tax system in the UK is inefficient and leads to errors and lost tax revenue. HMRC believes that Making Tax Digital (MTD) will mean the right tax will be paid at the right time, with fewer errors and penalties.
MTD comes into effect from 1 April 2019 for VAT registered businesses, including sole traders, partnerships and companies. Businesses below the VAT threshold will join MTD at a later date.
What does this mean for me?
This affects you if you use spreadsheets to record your transactions, or if you use accounting software.
If you use spreadsheets you will need to buy ‘bridging software’ which can digitally transfer your spreadsheet data into HMRC’s MTD portal. Bridging software is currently being developed by various software providers. The existing VAT portal, into which numbers are input manually, will no longer be available for many businesses.
If you use accounting software you will need to ensure you are using a system which is set up for MTD. All software providers are currently working on solutions and the status of these is changing every week.
You need to ensure you are using MTD capable software by 1 April 2019. You will need to get in touch with your current software provider to find out what your options are, or will be, in the near future. If you use spreadsheets to record your transactions you will need to decide whether to buy bridging software, or switch to accounting software. You may choose to outsource bookkeeping to a specialist.
We can help with this transition to make it as smooth as possible. If you need any help or guidance please call us and speak with one of our accounts team.